TREASURIES-Yields lowest in three months as tapering seen delayed

Reuters Staff

3 Min Read

* Ten-year yields lowest since July, fall to 2.50 pct
* Fed seen reducing bond purchases in March -poll
* Fed buys $3.15 bln in notes due 2021-2023
By Karen Brettell
NEW YORK, Oct 23 (Reuters) - U.S. Treasuries yields fell to
the lowest in three months on Wednesday, after
weaker-than-expected jobs data on Tuesday reinforced
expectations that the Federal Reserve is unlikely to reduce the
size of its bond purchase program in the near term.
Buying overnight helped yields fall further, after a rally
on Tuesday and no major data releases scheduled on Wednesday.
The government is catching up on delayed economic data after the
government's 16-day partial shutdown ended a week ago.
Market focus is now largely centered on next week's Federal
Reserve policy meeting, where the U.S. central bank is expected
to keep its $85 billion a month bond purchase program unchanged.
"The Fed is kind of handcuffed from doing any tapering, the
consensus is pushing it out to March. The weak (jobs) number
supports it," said Sean Murphy, a Treasuries trader at Societe
Generale in New York.
A Reuters poll conducted on Tuesday showed 9 of 15 U.S.
primary dealers see the Fed starting to reduce bond purchases in
March, with many of them blaming Washington's fiscal impasse for
a "significant" impact on the Fed's timing.
Data over the coming months is likely to be skewed by the
effects of the government shutdown, limiting insight into the
actual state of the economy and to what degree the shutdown and
the fight over raising the debt ceiling may have harmed growth.
The release of the October payrolls report has been pushed
back to Nov. 8 from Nov. 1. Other key data delayed includes the
Consumer Price Index for September, which will now be released
on Oct. 30, and the Producer Price Index for September, now due
on Oct. 29.
Private releases including next week's ISM Manufacturing
Index will be closely watched as they will be more current than
delayed government reports.
"That data shouldn't be tainted and will give us a hint as
to how everything that's happened in the last month really
impacts the real economy," said Ira Jersey, an interest rate
strategist at Credit Suisse in New York.
Benchmark 10-year notes were last up 8/32 in
price to yield 2.49 percent, the lowest since July 23 and down
from 2.60 before the jobs data was released on Tuesday. The
yields have fallen from 3.00 percent on Sept. 5, before the Fed
surprised investors by keeping the size of its bond purchase
program unchanged.
The Fed bought $3.15 billion in notes due 2021 to 2023 on
Wednesday as part of its ongoing purchase program.